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Orexigen’s Weight-Loss Roller Coaster to End With a Bankruptcy Sale

Orexigen Therapeutics has filed for bankruptcy to sell its weight loss pill to the highest bidder. The news follows years of ups and downs for Orexigen, which piled up debt as it struggled to successfully market its obesity drug, known as Contrave.

Orexigen (NASDAQ: OREX) has filed for Chapter 11 protection, which shields companies from creditors while they can either reorganize or sell their assets. In Orexigen’s case the plan is the latter: It will hold an auction, expected on May 24, to sell itself. The proceeds will help pay off its debts.

Orexigen had been hoping to enter bankruptcy with a lead bidder, known as a “stalking horse” bidder, in place. But court filings show that the company didn’t get a “credible preliminary proposal.” It will hold an open auction instead. “Several parties expressed an interest bidding,” court papers say.

But the FDA only approved Contrave if Orexigen kept testing it for cardiovascular side effects in a long-term study. And that study landed Orexigen in hot water with the agency once again.

In 2015, Orexigen filed a patent application based on the premature evaluation of that study, touting a possible positive benefit in preventing heart attacks. But the move caused the academics running the trial to shutter the study and angered the FDA—which wanted Orexigen to run a new study—as well as then-partner Takeda, which wanted Orexigen to pay for it. Further testing later showed that purported benefit waned as more data were accumulated. Takeda, after shifting “its overall business focus and objectives,” court papers say, bailed on the partnership in 2016, forcing Orexigen to build the commercial infrastructure needed to sell Contrave in the U.S. Orexigen piled up losses and took on debt to try to sell Contrave on its own, all while its stock price continued to fall.

Over time, Contrave has managed to become the most widely-prescribed weight-loss drug in the U.S., with 2.3 million prescriptions written since the drug was launched in 2014. But that hasn’t amounted to much for Orexigen. The drug’s sales hit about $98 million worldwide in fiscal 2017 (some $88 million in the U.S.), but that figure isn’t high enough to stop Orexigen from breaching a debt deal with noteholders owed $165 million. Contrave had to hit $100 million in 2017 as part of the deal, so Orexigen filed for bankruptcy. Court papers show Orexigen has burned through nearly $766 million since its inception and had just $46 million in cash at the end of 2017.

Vivus and Arena have had their own problems selling weight-loss drugs in the meantime. Vivus’ phentermine/topiramate (Qsymia) sold $48.5 million in 2016; its shares currently trade at $0.49 apiece. After disappointing sales, Arena sold off its weight-loss drug lorcaserin (Belviq) to Eisai in January 2017 and is since focusing on other diseases.